Million-dollar super targets labelled scare campaign

The popular claim that Australians need more than $1 million in superannuation to fund a comfortable retirement is a myth that risks undermining the strength of the system by discouraging ordinary people from saving a little extra while making them more vulnerable to poor advice, warns a new report.

"Increasingly, the public commentary around superannuation is telling us that you need at least $1 million to retire in comfort. Some financial 'professionals', many with vested interests, go even further and claim $2 million is a more realistic figure," Australian Institute of Superannuation Trustees chief executive Tom Garcia said.

AustralianSuper chief executive Ian Silk wants people to be reassured that even a modest superannuation balance will make their retirement more comfortable. Credit:Arsineh Houspian

"Concern about not having enough super to retire with could encourage those approaching retirement to take on unnecessary risk or see them vulnerable to the next get-rich-quick financial scam."

'Busting the $1 million retirement myth' is the title of the paper to be released on Monday that has been produced by the institute in conjunction with AustralianSuper.

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"It is a response to some really concerning feedback from our members who are worried and despondent as a result of reading a flurry of reports that they will need more than $1 million in the account to retire. Not only is that out of reach for the vast majority of people, it is simply untrue," AustralianSuper chief executive Ian Silk said.

The report is also critical of the claim that a $1 million lump sum is required to draw a comfortable retirement income for its assumptions about capital preservation.

"Suggestions that Australians need a $1 million nest egg to retire in comfort ignores that super is one pillar of a three-pillar retirement income system, alongside the age pension and personal savings outside of super. Overwhelmingly, people draw a retirement income from at least two of those sources," Mr Silk said.

"What we don't want is people feeling demoralised because a $1 million nest egg is out of reach and disengaging from taking more control of their super. If the average person can put just a little extra aside, every little bit really does help supplement the age pension and fund a better lifestyle in retirement."

It is estimated that fewer than five people in every 1000 in a pooled super fund have a $1 million balance.

The average super payout at retirement is about $160,000. That average is boosted by a small pool of people with quite large nest eggs. A typical retirement payout is about $100,000.

"These relatively low figures reflect the fact that our compulsory super system is still decades from maturity. But even after most Australians have saved 12 per cent of their earnings in super for their entire working life, $1 million nest eggs won't be the norm," Mr Garcia said.

The report estimates that, in 40 years, a typical super payout would probably be worth about $500,000 in today's dollars.

The Australian Institute of Superannuation Trustees is the peak body for all non-profit super funds, including corporate, public sector, and industry funds. AustralianSuper is the country's largest managed fund with $92 billion.